- The USD/CAD struggles to gain ground about 1,4175 in the Asian session on Monday.
- Delays in US tariffs and the weakest retailer sales of US retailers exert some sales pressure on the USD.
- The lowest prices of crude oil could weigh on the CAD linked to raw materials and create a tail wind for the USD/CAD.
The USD/CAD pair is still defensive around 1,4175 on Monday during the European session. The US dollar (USD) weakens due to the delay in the tariff plans of the US President of the US, Donald Trump, and the disappointing retail sales data of January in the US of inflation of the Consumer Price Index (CPI) of Canada for January, which will be published later on Tuesday.
Retail sales of the US weakest than expected undermine the US dollar (USD) in general. The fall in statistics is probably due to cold temperatures, forest fires and the shortage of motor vehicles, which suggests a strong deceleration in economic growth at the beginning of the first quarter.
In addition, the president of the USA, Donald Trump, approved a proposal of reciprocal tariffs on Thursday, but delayed its implementation while their administration carries out individual negotiations with the nations that could be affected. This, in turn, contributes to the decline of the USD. However, the growing expectation that the US Federal Reserve (Fed) would maintain its hard line posture amid high inflation could act as a tail wind for the pair.
The fall in crude oil prices to a minimum of almost two months amid the hopes of a peace agreement between Russia and Ukraine could drag the Canadian dollar (CAD) linked to raw materials downwards against the US dollar. It should be noted that Canada is the largest oil exporter to the United States (USA), and the lowest prices of crude oil tend to have a negative impact on the value of the CAD.
Canadian dollar faqs
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Canada Bank (BOC), the price of oil, the main export product of Canada, the health of its economy, Inflation and trade balance, which is the difference between the value of Canadian exports and that of their imports. Other factors are market confidence, that is, if investors bet on riskier assets (Risk-on) or seek safe assets (Risk-Off), being the positive risk-on CAD. As its largest commercial partner, the health of the US economy is also a key factor that influences the Canadian dollar.
The Canada Bank (BOC) exerts a significant influence on the Canadian dollar by setting the level of interest rates that banks can provide with each other. This influences the level of interest rates for everyone. The main objective of the BOC is to maintain inflation between 1% and 3% by adjusting interest rates to the loss. Relatively high interest rates are usually positive for CAD. The Bank of Canada can also use quantitative relaxation and hardening to influence credit conditions, being the first refusal for CAD and the second positive for CAD.
The price of oil is a key factor that influences the value of the Canadian dollar. Oil is the largest export in Canada, so the price of oil tends to have an immediate impact on the value of the CAD. Generally, if the price of oil rises, the CAD also rises, since the aggregate demand of the currency increases. The opposite occurs if the price of oil drops. The highest prices of oil also tend to give rise to a greater probability of a positive commercial balance, which also supports the CAD.
Although traditionally it has always been considered that inflation is a negative factor for a currency, since it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross -border capital controls. Higher inflation usually leads to central banks to raise interest rates, which attracts more capital of world investors who are looking for a lucrative place to save their money. This increases the demand for the local currency, which in the case of Canada is the Canadian dollar.
The published macroeconomic data measure the health of the economy and can have an impact on the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can influence the CAD direction. A strong economy is good for the Canadian dollar. Not only attracts more foreign investment, but it can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the economic data is weak, the CAD is likely to fall.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
